An SEOBook reader, Josephbm91, outlined a problem many of us have faced: when you're starting out, it's easy for clients to walk all over you.
So let's take a look at strategies for those starting out, be it in SEO, web design, or other small, web-based businesses. Those of you who have established web businesses, it would be great if you could share your experiences and strategies in the comments :)
Making The Start
How do you make the start? You've got a computer, an internet connection, and a few ideas. How do you get from that point to a thriving business, when you have no customer base, no money and no experience?
Yeah, it's hard.
But you'll literally work through it :)
Society Is Testing You To See If You're Serious
Ask anyone in business, sports, music or any other competitive human endeavor how they got recognized in their given field. They'll most likely tell you it didn't happen overnight. Whilst talent, luck and having the right connections play a part, the one trait common to those who succeed is persistent hard work.
In Outliers, a book about how people achieve extraordinary things, Malcolm Gladwell found that to achieve mastery in anything - be it golf, webdesign, programming, music, fashion - takes roughly the same amount of time: 10,000 hours.
Thankfully, we don't need to be masters at running a small business before we start one, else no one would ever do so. But the underlying idea is sound - persistent hard work is the key to success.
Being persistent sends a message to those around you, including potential customers, that you're serious about what your doing. If they see you often enough, doing the thing you say you do, then you'll eventually be recognized for it.
So if you feel you need to prove yourself, you're right. Society actually demands you do.
What Is Worth Getting Serious About?
Many people start businesses because they enjoying doing something. Someone who plays sport may have the desire to be paid a good living wage for playing the game she loves. Someone is good at art, so he wants to be a designer.
Whilst there is nothing wrong with this approach - having a genuine passion for something will help you get through the rough times - I'm sure you can spot the potential problem. There might be a LOT of people who have a passion for the same thing. The more people who want to do something, the more effort you need to put in in order to stand out.
In terms of sport, it's relatively straighforward. The sprinter with the fastest times gets recognized and progresses. Those sprinters with slower times either get better, or go find something else to do. In business, its a little more complicated, but the principle remains the same.
You need to stand out.
Supply And Demand
Think carefully about supply and demand. Ask yourself: is there sufficient demand for what I want to do?
Let's say you want to do web design. Is there demand? Why, yes, the demand for web design services is almost infinite. New companies start every minute, and most of them will need a web presence. Established companies who already have a web presence change their design from time to time, thus creating even more demand.
Now let's look at the supply side.
How many people want to be web designers. The answer is: quite a few. In fact, it would appear that web design demand is more than met by the supply of web designers. What happens in such situations is there is a downward pressure on prices, because those who create demand have a lot of supply to choose from.
The world is oversupplied with web designers. At least, it's oversupplied by people who call themselves web designers. There's a difference, of course, between someone who owns the tools of production and those who use those tools well to solve business problems. Owning a camera does not make someone a commercial photographer. Likewise, those with the most artistic design skills may make lousy web designers if they aren't focused on business aspects.
Recognizing the reality of the situation might may you reconsider your choice of career, and opt for an area where there is heavy demand and short supply instead.
Another way to face this problem is to differentiate. Can you do something better than other designers? You may be highly skilled in contemporary graphic design, in which case you may choose to place strong emphasis on displaying your portfolio, and target the type of clients who appreciate - and will pay for - this expertise.
You may have, or can acquire, detailed market knowledge in one particular niche - i.e. travel sites, real estate sites, etc. Clients, generally speaking, are a lot more comfortable with providers who understand their area of business. You have an advantage if you can speak their language, rather than just the self-absorbed language of design forums.
Can you focus on a geographic area? i.e. the immediate area where you live. Sometimes, people want to deal with someone local.
What is the thing you can do for which there is a market? If there are too many competitors in that market, then slice that market up until you can find a niche. Aim to be top of that niche. Then put in persistent effort working that niche in order to build reputation.
Chris Pearson gave away a number of popular free Wordpress themes on his site, created designs for popular sites (including Copyblogger & SEO Book), and then created the Thesis theme for web developers, which has since done 7 figures in sales volume. Yes Wordpress themes have become commoditized, but due to his strong marketing and continual increase in product value he was able to differentiate & build a solid business model. In his own words on starting out, Chris wrote:
Before I launched Thesis, I created a few free WordPress themes that became extremely popular. Although these themes defined the early stages of my career, they are really nothing more than visible markers of a learning process that continues today with Thesis.
Once you've decided on an angle, you then need to establish yourself. Society wants to see how serious you are.
It is very difficult to market a business without some form of track record. But every business needs to start somewhere, and they don't start with a track record. So, the most important task for someone starting out - in any occupation - is to get one.
One way to get a track record is to treat your first few jobs as a marketing cost. This is the cost of establishing a reputation, and if you make any money at all from these first few jobs, it's a bonus. The aim is to get referrals and a portfolio of work.
Approach charities or small local business who need a web presence and offer your services for a deeply discounted rate, or for free. It's a win-win for both parties, because they may not be able to afford web design, and you need their testimonials and experience.
Be sure to make it clear that the job is being done at a discounted rate, and let them know what your usual rate it. This way, they'll perceive value, and won't be in for a shock when you ramp your prices up for any future work. Focus on building a positive relationship with these clients. If they are happy with your work, they may well refer you to others.
Once you have a track record, the risk to a future customer of hiring you is diminished. You become a known quantity, which puts you above the wanna-bes.
Is this working for free? Some might consider it that way, but it could also be seen as just another marketing expense, like advertising. Many businesses, including big, established businesses, give away products and services - in the form of loss leaders - in order to help get their foot in the door. People who train for careers pay to learn, whilst as a freelancer, you can potentially learn on the job for free. Clients can teach you a lot about your own business , especially where your strengths and weaknesses lie.
It's important not to stay cheap or free, however.
Some think the easiest way to get business is to undercut competitors on price. This can be a self defeating strategy, especially for the sole operator, for a number of reasons:
You get cheap clients - people who seek the lowest price probably aren't placing much value on what you do. These type of clients, ironically, can also be the most demanding. They want the most for the least, and will often push you on the amount of work you deliver.
Someone else can always undercut you. There will always be a competitor who has a cost base lower than you do. From there, you're locked in a no-win race to the bottom.
If it looks cheap, it is cheap. It's human nature not to value something that is cheap, and place a lot of value on something that is expensive. In the book How We Decide, by Jonah Lehrer, the author describes an experiment conducted with wine. Participants were told one bottle was cheap and one was expensive. The expensive bottle got rave reviews from tasters, and the cheap one - not so good. However, the labels were switched. The expensive wine was actually the cheap wine.
Perception counts for a lot.
So if your angle is cheap, make sure your margins are still high enough to sustain you. Only you know how much you need to survive at any given time.
Alternatively, target ruthlessly, either by offering a superior, needed product, more niche know-how, or find some other angle where there is untapped demand. Be prepared to prove your worth by providing case studies describing how you've solved people's business problems in the past.
Got any other tips for those starting out? It would be great if you can share what you know :)
Top Intersection: Most of these people are not available for traditional client consulting projects because they simply lack the time needed to do them and run many successful projects of their own.
Right Intersection: The person who is available and under-priced quickly gets overworked. I have experienced this with multiple contractors in other fields where they would offer killer services and be surprisingly affordable and fast...and then on the next project they would disappear.
The guy who made the logo for SEO Book back in early 2004 was probably the most talented and most unreliable logo designer I have ever worked with. Sometimes he would be fast, sometimes he would be slow, and sometimes I would pay him and get no response. I wanted the guy to become more successful and reliable so much so that I offered him tons of free marketing so long as he would be available for the boatload of work I was going to send him. He said sure. Before beginning that marketing campaign I asked him if he was ready and got no response. ;)
And last year there was a designer/developer that had amazing skills. We hired him full time and it took him 2 months to make a website design. There are a lot of people in the world who are talented at what they do, but just are not skilled at business and/or do not approach their business like a business.
Left Intersection: There are lots of people who are good at sales who have no substance. If an SEO firm contacts you out of the blue (via tele-spamming or email spam) that is a good hint that they have more salesmen on staff than they have practitioners. If SEO is bolted on as a package for cheap then it is usually a scam.
It is nearly impossible to have enough time to study a fast changing craft, brand yourself as an expert in the space, and yet still find time available for doing consulting. It is not hard to do any 2 of the 3...but all 3 is brutally tough. In consulting so long as you have popularity you do not need much knowledge, as some well known SEOs have proved. But knowledge without popularity can be hard to monetize effectively.
Even if you are pretty decent at sales and have a strong brand it is hard to make an SEO services business model scale without watering it down. And watering down is rarely a solution because it leads to churn.
The guy who speaks at 40 SEO conferences a year does little SEO work...his job is to generate leads for the firm where an intern can work on the project. And the projects that the interns work on are rarely top shelf because you often pay expert rates while getting automated and systemized mystery meat services from someone new to the market.
Corporate client projects which at first may seem like mega-paydays still perform poorly when compared against putting the equivalent effort into growing your publishing projects.
Rather than watering down we have decided that scarcity and value are a better strategy. But that is still a work in progress. This site is about 90% of my work time, had a 5 year head start on most of our other publishing efforts, and yet the SEO industry is so hard to monetize (unless you use loads of hype) that this site earns a minority of our income. As we get better at sales we can try to increase earnings...but lately we have just been pushing more on what is working and maintaining this site's quality for existing members (and closing it off to growth) while putting a bit more effort into the higher yielding projects.
Following on from my post "What To Consider When Starting An SEO Agency", we had a few questions about how to approach the design agency model. This is a model whereby you partner with web design companies. I used to run this model, so here are my ideas on how you can approach it.
What Is The Design Agency Model?
This is when you partner with one or more design agencies who do not have a SEO skillset in-house. This can be for a variety of reasons. Perhaps SEO has never occurred to them, they might not have enough full-time SEO work for a new hire, or SEO just seems like too much hassle.
Forming design agency partnerships can be quite lucrative for the SEO. The design agency typically has a stable of existing clients, and if they're big enough, a salesforce who bring in new clients on a regular basis. The design agency bills hours. In essence, they are a consulting business. The more hours they bill, the more money they make. To scale a design agency, they simply add more bodies.
This is where the opportunity lies for a win-win
How To Approach It
When a design agency is pitching to a client, their incentive is to pile feature upon feature, which of course, takes time to build. The more time they can bill for a build, the more money they make.
SEO is an add-on feature.
Some agencies will be happy just to have an extra service option available to clients so the client doesn't go elsewhere, but most agencies will want a cut. I used to work on 10-15%. Because the clients tend to be corporates, you could charge quite high prices, and they wouldn't blink.
Chances are, the design agencies clients are already asking about SEO. Typically, this happens after the site is actually built, and the client can't find themselves on Google. When you find such an agency, it's not difficult to put a mutually beneficial deal together. The demand already exists, and they can't service it.
Identify agencies that are not so big as to have an SEO capability in house, but big enough to attract a steady flow of clients. It's good if they are in your town. Having the ability to go and see them, and work alongside their sales people and designers if need be, is a big plus.
Try to arrange a face-to-face meeting. SEO has a fly-by-night reputation, so it's much easier to establish credibility if you're sitting in front of the people making the decisions, rather than being a detached voice on the phone. They'll also want to see that you're presentable to their clients if you need to attend meetings.
The pitch is you offer white-label search marketing services. You can sweeten the deal by offering to do the first project at cost. The aim is to prove concept and prove that you can fit in with their way of working. It's no different than a job interview and trial period in this respect.
The seamless white label SEO service you provide has little or no overhead cost to the agency. They don't need to hire you and provide you with staff benefits. They'll want to know how and where you fit into the design process, so be prepared to answer such questions. The subtext of this question is they want to know if there are hidden costs i.e. is your work is going to slow the designers down, or make life difficult for them. You could approach this question by saying that if you're in the projects at an early stage, you can make painless recommendations in terms of site build. Emphasize how your work will fit in smoothly, yet provide their clients with added benefit.
Also provide them with marketing collateral. This is the text they include in sales proposals. State the benfits of search engine marketing from a business perspective. You'll get a feel for the type of infoirmation you need to include by looking at their existing proposals. Typically, sales proposals aren't technical in nature. Give an overview of what you do, the benefits you provide, and the cost.
I found that including a PPC option is a good way to go, especially for clients, or agencies, who don't have much awareness of SEO. Even if the designers ignore all your recommendations - believe me, this happens - you can rescue the situation by ensuring traffic still arrives via PPC. You can then demonstrate that traffic is arriving via the search engines, and if you have more input in future, those traffic levels will increase.
Once you've got the first job under your belt, you can negotiate long term arrangements with the agency. You can then go to other agencies - careful that the agencies don't compete directly - and offer the same service, using the first agency as a reference. Repeat until you have as many agencies as you can handle. 4-5 reasonably sized agencies can create a flood of work for an SEO, so much so you'll soon find yourself employing extra staff. That's a great return for 4-5 hour long meetings.
Billing can be by the hour or project based.Try to fit in with however the agency bills. I found most like a project based pricing scheme unless there is significant level of ongoing work.
There are significant benefits to this model for the small SEO provider.
Firstly, you outsource the sales function. Sales can be very time consuming and expensive, and have long lead times. The agencies sales force has an incentive to work hard for you because they can sell higher billing projects, upon which their commissions are likely based. Get onside with the sales people as early as you can. Emphasize benefits such as how many people are looking for SEO services, how valuable an add on it is, and how much agency level SEO can charge. The sales people are your friends, as you earn them more money.
If you've selected your agencies carefully, you get to work with bigger clients than you might otherwise land yourself. Besides being more lucrative, you get to work up more and more contacts at high levels. These people often job hop from corporation to corporation, which opens further opportunities for you down the line.
You don't have to build up your own brand, which can take a lot of time and effort. You leverage off the pre-existing brand and reputation established by the agency.
Loss of control. It can be harder to pick and choose clients if the sales person is keen to sell every client on SEO. This is why it is important to plan for contingencies i.e. if you get a client hell bent on an all flash, brand heavy site, then be prepared to become Mr PPC. You'll also have less control over projects, as projects are typically managed by dedicated project managers.
Hostility form designers. Designers typically don't like people dictating design standards to them, especially people from outside the agency.
Look for areas where there is cross-over and articulate SEO in their terms. For example, if an agency is focused on usability, then talk that aspect up - usability imperatives and SEO often go hand in hand. Have alternative, low impact SEO strategies ready if you can't get your first choice on strategy. For example, add a site map to facilitate crawling, focus on off-site strategies like link building, build a site-within-a-site consisting of pages that aren't part of the main design, and suggest alternative navigation for those with disabilities.
Some designers are fine, of course, but expect the most push-back in this area. If you get too much push-back because you are imposing what they perceive as draconian conditions, then they will likely complain about you to management. As the designers are the bread and butter of the agency, and you are merely providing an add on, you may soon find yourself out of a contract.
You don't own the clients. The clients belong to the design agency, and they might not want you to use the names of their clients in your promotional material. Also, if you ever want to sell you business, you don't have a client list to sell, which is typically the only thing of value. Essentially, you are not building a business you can likely sell, you're operating as an independent contractor.
When it comes to billing, make sure this is not dependent on the agency getting the money out of the client. Bill the agency directly and let them worry about credit risk. It can be difficult to chase their clients for money due to the indirect nature of the contract.
Any questions? Add 'em below. It would also be good to hear from SEOs who run this model.
Starting your own SEO business can be a challenge. In DMOZ, a directory often hostile to SEO listings, there are still over 1,018 SEO service companies listed. Do a Google search on SEO companies, are you'll see.....quite a few more!
Ok, it's a big planet, and there is room for many operators, but it's true to say that in the SEO game in 2009, no one is short of competition.
There is a lot of competion because there is a low barrier to entry. In order to enter the SEO market, someone only need put out an open for business sign, in the form of a website, and they are as much an SEO Agency as the next guy.
Maintaining a profitable business is another matter, of course.
If you're thinking of starting an SEO agency, here are some aspects you should consider, and some recommendations on how to position in today's marketplace. If you're an SEO who has started their own business, and made a success of it, it would be great if you could share your experiences in the comments below. What are the things you know now, that you wished people had told you when you started?
The first part of your plan should be all about you.
What are your strengths and weaknesses? Are you a self starter, or do you prefer being given work to do? Take a long look in the mirror and be honest with yourself: is running a business really something you want to do, or is this a means to avoid looking for employment? How suited are you to running a business?
No doubt you can see where I'm going with this. There are personality traits people have that make them suited to running a business, including a desire for independence, being a self-starter, and having the ability to take financial risk. One such risk is the lack of steady salary. Do you have a means of financial support? Savings? If you do, it will make life a lot easier. If you don't, consider building up that safety net before you start.
Once you've decided that this is definitely for you, great! Working for yourself can be an immensely rewarding thing to do.
Where are you going and how will you get there?
Map out a business plan.It need not be complicated. In short, what can you offer that your competition can't? How much will you have to sell in order to cover your expenses and make a profit? How, exactly, are you going to sell your services and execute delivery?
Once you get a feel for the figures, it will make it easier to see if your ideas are achievable.
How much money will you need in order to get out and sell, and then to provide the services? How much money will you pay yourself? Do you need staff? Do you have an accountant? Do you know your break-even figure? How will you manage bad debts or late payments?
All business ultimately comes down to maths. You need to bring in more than you pay out. Failure to do that means the business fails.
Two important areas are cashflow and value of a good accountant.
Business lives or dies on cashflow. A business can be selling well, but if it doesn't have enough money in the bank to meet payroll or rent at the end of the month, it is finished. Try to arrange sufficient overdraft or investment to ensure you can survive between bill payments. Clients often pay later than you want them to.
Secondly, an accountant is worth their weight in gold. Not only do they take on tedious business of tax filing, they make sure you are claiming all the deductions you're entitled to. For example, your computer equipment, your use of home, your broadband, your electricity use can all be charged to your business. This reduces your costs and tax obligation.
4. Your Idea
Does your business serve a customer need or want? Can competitors easily copy what you do?
These are two critical areas. Many people go into business because they want to do something they like doing. That's ok, so long as there is enough consumer demand. However, think about the number of actors and musicians out there. Most aren't making much, if any money. This is because they are pusrsuing a job they enjoy, and largely ignoring supply and demand considerations. Ignoring supply and demand is ok for actors, but it's poor way to run a business. What can you supply that there is a ready demand for? Can you create new demand?
Secondly, the barrier to entry. Because it is so easy to start an SEO business, you'll need something else to differentiate yourself, other than just having a website. A website is the base level entry point. What have you got that others can't copy? Are you able to service a geographic locality better than other providers? Do you know a particular market vertical well i.e travel/fashion/finance/auto? Do you have a name/brand people know? Can you leverage reputation and contacts from your previous career?
5. Marketing and Sales Strategy
This is part of your business plan, but it is an area that requires special attention. Without a marketing strategy, how are people going to know who you are? How are you going to sell to them? If your answer is SEO or PPC, you'll be up against a lot of competition. Those channels are saturated, and in most cases, there is little to distinguish one service provider from the next.
How do you intend to implement your strategy? What channels will you use? Have you allocated time and money to that strategy? For example, if you intend to speak at conferences, you need to budget for the travel and attendance. You also need a plan for who is going to do the work while you're away marketing and selling.
The sales cycle can be long and tedious. The bigger the client, the longer sign-offs can take. Typically what happens is that many prosposects will all sign off at once, after months of indecision! Can you scale up quickly if a lot of work comes in? Will you turn down work?
The Challenge In 2009
The specific challenge to SEO services providers in 2009 is differntiation. There are many people offering services, so how do you stand out from the rest?
One way is to zig when other zag. Is everyone heading off to the same SEO conferences, saying much the same thing? Instead, how about going to the conferences no one else goes to? Travel industry conferences. Dental conferences. People in those industries need SEO, and you might be the first person who has ever talked to them about it! With careful selection and a little luck, you might corner a lucrative, untapped market.
Do companies really need SEO services? Perhaps they just need their own people trained. Can you offer in-house training courses? How about providing a number for them to call whenever they have an SEO question? Be the go-to guy for a number of small firms who may not be able to afford a full seo service, but might be able to afford an hour of advice or coaching each month.
Partner with design/devlopement companies. Perhaps they can't afford to hire a full time SEO on staff, but if you sign up 4-5 design companies, and offer your SEO service as an add on, you should enjoy a steady stream of work. They do all the sales work for you, you just do your part, and bill the agency. They take a cut.
Got any other ideas on differentiation, or war stories about running your own business? Please feel free to comment :)
If you're thinking of starting SEO business, one of the key decisions you'll need to make is where to setup. One of the advantages of the internet is that distance doesn't become the obstacle it once was. An office can exist virtually, with the workforce spread out across the country, or around the globe, with employees working from home.
Let's take a look at the many advantages and disadvantages of the virtual business. It would be great if those who have already established their own SEO businesses could share their experiences in the comments :)
1. Financial Concerns
One of the biggest problems for any start-up is lack of finance. Keeping overheads low in order to maximize cashflow is therefore a good idea, and one of the biggest overheads a business faces in the early stages, besides wages, is setting up an office. The rent must be paid and equipment must be hired or purchased.
A virtual company uses existing premises i.e. the home and, in many cases, existing equipment.
2. Opportunity Cost
Small companies can out-maneuver bigger companies by being more efficient and more productive.
Say employees in a traditional company must commute an hour round trip each day. Then add the time they take to get ready for work. Perhaps that all adds up to an hour and half each day. In a year, this dead time adds up to months! Whilst employees can get work done on the commute if using public transport, it's not an ideal space for concentrating.
The lost time for the virtual office is essentially zero. No commute. No getting ready. Well, maybe putting some pants on might be a good idea :)
3. Less Meetings/Water Cooler Activity
How much meeting time is actually useful? How many hours of the day do we spend chatting with work mates?
Having worked both in traditional environments and virtual environments, I've found I get a lot more done in virtual environments. The social element of traditional workplaces, whilst beneficial in terms of morale, can result in less productivity. The virtual office, on the other hand, tends to be a lot more task focused. "Meetings" (Skype) are a lot shorter, organising them is a lot easier (no room bookings), and because you're not face-to-face with people all the time, there are fewer minute-by-minute distractions.
4. Virtual Office Employees Can Work Longer Hours
I don't know why this is, but I suspect it's because virtual office employees make less of distinction between working time and personal time. It was actually one of the "downsides" I found when I first worked from home - it was near impossible to leave work! Each time I passed the office, I was tempted to do a little more.
When you commute to an office, it's easier to walk out the door and leave it all behind.
5. Employees Really Like It
Some people will work for less wages for the privilege of working from home. They gain in other ways i.e. more flexible arrangements, time spent near family, reduced costs of lunch, enjoying their own surroundings, not having to communte, etc. A happy employee typically produces more work, and stays at the company longer, thus increasing productivity and reducing expenses.
Of course, the virtual office has downsides. One of the big downsides is the reduced social interaction. Some people thrive on the social interaction of the work place, and are not suited to the virtual office. The key is to screen employees carefully. Some virtual offices also setup in coffee shops to help counter the social isolation.
Home can also be a distracting place. Employees need an area away from other people.
Clients may perceive your company as less serious if it operates out of a home address. The way to get around this is to rent a mail forwarding address and the occasional meeting room in the center of town. There are companies that offer these facilities, and you can use meeting rooms and secretarial services on an hourly basis. I've also found that big clients don't go to small suppliers anyway. They demand you to come to them!
Some people need to be micro-managed. Again, careful selection is the key. Also try to make delivery task-based as opposed to based on hours worked.
What have been you experiences - positives and negatives - of your office setup?
There are a number of ways to monetize a site. Aaron covers the options in extensive detail in the "Monetization" members area , however today we'll take a close look at just one aspect of monetization, Affiliate Marketing.
What Is Affiliate Marketing
Affiliate Marketing is a marketing method whereby one business rewards another business for sending customers, visitors and/or sales.
Mostly, affiliate marketing rewards come in the form of revenue share on a sale. Site A (the affiliate) funnels visitors to Site B (the merchant). If a transaction is completed by the merchant, the affiliate receives a commission on the sale. Do this numerous times a day in a high-margin area, such as loans, and both the affiliate and the merchant can make a lot of money.
Affiliate marketing is nothing new.
In the carpet markets in Turkey, you get pestered by salesmen whos job is to tempt you off the street and across the threshold of a carpet shop. He - its invariably a he - might get paid for bringing you to the door (the online equivalent is equivalent to cost-per-click), or, if you buy a carpet he receives a commission (cost per action). Or perhaps a mixture of the two.
The benefit to the merchant is that he doesn't have to pay the full time wages of the salesman, and he only pays him on performance. The benefit to the salesman is that he doesn't have to own a shop, carry merchandise, deal with transactions, or any of the other costs associated with running a carpet shop.
In 2006, MarketingSherpa estimated online affiliates worldwide earned US$6.5 billion in bounty and commissions
The Players & How It Works
The Affiliate Marketing industry consists of three core players:
The Prospective Customer
As the affiliate model became big business, further levels emerged, including sub-affiliates and affiliate networks. We'll take a look at the role of the networks shortly.
The Pros Of Affiliate Marketing
Easy To Set-Up - You simply need to select a program, sign-up, add the tracking code to your site, and you're good to go.
Focus On Your Core Skills - If SEO is your key skill, you can focus 100% on rankings and traffic generation. You leave all the customer handling, sales, returns, legal issues and transactions to someone else.
You'll also be amongst esteemed company. The top affiliate marketers who use SEO to generate traffic typically rank amongst the highest-skilled SEOs. They live or die based solely on their ability to rank well in highly competitive areas.
Low Startup Costs - setting up commerce delivery online can require a lot of start-up investment. The affiliate need not invest anything other than some time. If one area doesn't work out, the affiliate can quickly move onto another area. The merchant has to too many sunk costs to do likewise.
Multiple Income Streams - once you've honed your sills in one area, you can apply them to any area you choose. There is no limit to the number of merchants you can work for, so you are free to develop multiple revenue streams. Some merchants will give you ongoing revenues based on customer activities, too.
Cons Of Affiliate Marketing
Low Level Of Control - Unless you have a close relationship with your merchant, you have little control over offers.
If their competitors are offering better services and/or lower prices, you can't counter unless the merchant changes their offer in line with the market. You're also pretty much stuck with the same standard offer available to every other affiliate you're competing against, making it difficult to differentiate.
There are exceptions.
Sometimes super affiliates - those affiliates who consistently put through high sales volumes - get offered special deals. It's unlikely you'll know what these deals are unless you become a super-affiliate. Some programs allow pricing control, but mostly, you're dealing with cookie cutter offers.
Customer Base Not Locked In - The merchant keeps the customer.
Typically, you deliver the customer, the merchant pays you a one-time commission, then that customer remains theirs for all subsequent purchases. The value of the merchants business increases the more customers they have.
As an affiliate, you don't tend to have lock-in on the customer. Some affiliate deals offer you on-going revenue, however.
High Competition - One of the pros of affiliate marketing is that is is easy to sign up and get started.
This is also a negative.
If it is easy for you to sign up, then it is easy for everyone to do likewise. There are new affiliate hordes arriving each and every day. The incentive for the merchant and affiliate network is to sign on as many performing affiliates as they can, so they don't really care if you face ever increasing levels of competition.
This is why top affiliates look for private deals. More on this shortly.
PS: As I stated above, you'll be amongst esteemed company. The top affiliate marketers who use SEO to generate traffic are typically very highly-skilled SEOs. They live or die based solely on their ability to rank well in highly competitive areas. These people will also be your competitors :)
Pay On Performance - This is a great option for the merchant. They only pay when they sell something. What this does is transfer all the advertising risk to you.
You may spend weeks or months on SEO and make no sales. This might not even be your fault. You get great rankings and traffic, but the merchant has an uncompetitive offer, or loses customers at the point of sale.
Middlemen - As the affiliate area has grown, so too have the number of middlemen.
The biggest middleman in the chain is the affiliate network. The affiliate network is the go-between linking the merchants with the affiliates. Commission Junction is one example.
The network often provides valuable reporting tools and tracking, as well as affiliate and merchant support. Of course, all this costs money and places an additional layer between the affiliate and the merchant. Whilst the network may provide benefits in terms of reporting and support, it also reduces the level of control and contact the affiliate has with the merchant.
Limited Growth Potential - Because you can't lock in your customers or adapt deals to suit changing market conditions, growth potential is limited. Like the carpet salesman, you rely on a new stream of visitors each and every day with no way to grow what you do, other than by adding sub-affiliates.
There is a solution to many of these problems, however.
There are many affiliates making very good money following the model I have outlined above.
However, as affiliates get more and more successful, they often look to partner direct with merchants. This way, they cut out the middlemen - leaving more profit for the affiliate - and gain a closer relationship with the merchant.
Some affiliates structure the entire deal, and take a percentage of the merchants earnings over time. Whilst this approach requires upfront organization, the long term payoffs can be huge compared to the traditional network-driven affiliate model.
But how do you do it?
First, you need to look at areas where there is high returns and low levels of competition.
Make a list of merchants who have a web presence in your chosen area and have the ability to take online orders or inquiries. Approach these merchants directly. It's a good idea if you can demonstrate potential traffic levels and sales, so come armed with this information.
Look to sign up exclusively i.e. you're the only affiliate working with them. Also try to get a cut of ongoing revenue i.e. if the customers becomes a repeat customer, you receive repeat commissions. The bonus to the merchant is that you're a salesman willing to work on a commission basis. There is little risk involved for the merchant, and most will be only too happy to at least consider your proposition.
These types of deals require a high deal of trust and transparency, so it's unlikely you'll get everything you want right away. Suggest a trial run to prove your worth, then negotiate favorable terms once you've proved yourself. If the merchant turns you down at that point, then you simply go to his/her competition, with your accumulated data, and make the same offer.
This way, you should be able to build up a private label affiliate system. You can bring on your own hand-picked sub affiliates to work with you, too, and if you've selected your market correctly, you should face little or no competition. As you have a close, direct relationship with the merchant, you can work on structuring product and service offerings that remain competitive. It becomes more of a partnership that can be nurtured and made valuable over time.
Some of the biggest money-making affiliate opportunities you'll never hear about.
Framing is when you use language to set the agenda.
Framing is short for "frame of reference", meaning "a set of ideas, conditions, or assumptions that determine how something will be approached, perceived, or understood".
This is a very important concept in marketing, and business in general. By using an appropriate frame of reference, you can manage how people perceive you.
Seo Is Spam?
For example, "SEO Is Spam" is a frame. It defines the terms of the debate ie. SEO is either spam or not spam. Would we frame the couriers this way? Couriers are spammers? Why do the terms "SEO" and "spam" necessarily go together?
They don't. That's a deliberate construct.
SEO is spam/not spam is an attempt to frame SEO as undesirable by associating SEO with a pre-existing pejorative term. That frame came from the search engines, and it has stuck with the industry since the days of Infoseek.
Who is ranked as the #1 ethical SEO company in the world?
Some SEOs have contributed, too, of course, but it has served the search engines well. No matter what side of that debate SEOs take, they have already lost. They've been forced to argue within a negative framework.
Getting The Frame Wrong
My personal view if that if you start by framing your SEO service solely in terms of ethics, you're probably losing business.
It's a red-flag.
Potential clients would undoubtedly see such a frame in terms of "where there is smoke, there is fire". Would you trust a car dealer who, upon meeting you, launched into a long explanation of why car dealers have a bad reputation, but he's not like the other dealers, no sir? Why even bring it up? I'd think that he was trying too hard, and really all I'm interested in is buying a car.
Sell me on that instead.
It's the same with potential SEO customers. What are they really looking for? Once you've answered this question, then you can begin to work on your frame.
How To Construct Beneficial Frames
Politicians use frames all the time.
For example, Al Gore framed the environmental issue as “man made global warming.” Bush re-framed it as “climate change.” Those different frames imply different things. One implies "we can do something about an impending disaster by changing our habits", the other frames man in a passive role, because climate change is a natural occurrence.
Both those frames supported the underlying political message.
Same goes with business.
Marketers know that the way a statement is framed influences how customers respond to it. Tell a group of base jumpers that 1% of all base jumpers die horrible deaths, and you'll get few people signing up. However, tell them that 99% live, and it sounds a whole lot more appealing.
A friend of mine told about how he handled an irate customer by carefully framing his response in terms of options. The customer hadn't received his goods - although they had been sent out - and was quite angry about it. My friend listened to the problem, and rather than debate about shipping delays, the offensive language of the customer, and other factors, he replied "I hear you. You'll get one of two things - a complete refund, or a replacement package sent overnight delivery. I just need to find out which option you want".
The customer, given a limited frame, calmed down, opted for the replacement package, and later published an article in, using this story as a great example of customer service. He also became a repeat customer. Using options can be a great way to frame, although care must be taken to present options that are meaningful. Trying to force people to take options they don't actually want, won't work.
SEOBook isn't framed in terms of individuality, ethics, or morality. It is framed as a community-based SEO training site that will help you learn, rank and dominate. There are also mentions of exclusivity, and frequent explanations of value. This is what customers want, and Aaron frames the service in terms of these needs.
So when you're pitching your goods or services, think carefully about the frame of reference.
Make it positive. Make sure it resonates i.e it touches on attributes the customer actually wants. If the customer perceives widespread dodgy practices, then it is a good idea to address them, but be reluctant about framing your service in such a way to everyone. No good comes from starting on the back-foot.
A good way to frame an SEO business is to talk about solving problems and providing benefits i.e. lack of traffic/more traffic, lack of business/more business, lack of exposure/more exposure etc.
Let this flow through into the language you use. And the language you avoid.
Following on from our posts on SEO business planning, let's take a look at allocating capital. We'll also take a close look at one of the most important areas for SEO consultancy start-ups: advertising and marketing.
Never a truer phrase was said than "you need to spend money to make money". Thankfully, in the SEO game, you don't need to spend a lot, like brick-n-mortar companies need to do in order to get going.
How do you decide where to spend your money? Do you go by gut feel? Do you quantify and measure results? Whatever approach you use, the end result is that any spend you make should ultimately grow revenue.
Common Areas Of Capital Allocation For SEO Companies
Let's take a look at three areas in which a start-up SEO company will likely spend money. Equipment, staff, and sales and marketing.
The SEO business isn't capital intensive. Many SEO consultants need little more than a computer with an internet connection. If you hire staff, then obviously you'll need somewhere for them to work, but besides that, capital investment is minimal.
If you're a sole operator, obviously you have no fixed staffing costs, other than the wage you choose to pay yourself.
You'll likely need to budget spend for outside contractors for doing work you can't do yourself, or work that it isn't worth your time. For example, if you're a sole operator, you'll want to spend as little time as possible on non-core activities. Non-core activities are activities that don't lead to revenue generation, such as administration and accounting.
By the way, a good accountant is worth their weight in gold. By ensuring that you claim all the deductions you're entitled to, you have more money to invest in your business. You can write off a part use of your home, your computers, your internet connection, travel and more. Accountants are relatively cheap, and their fees are more than covered by the tax savings they produce.
If employing people, figure out the total cost of an employee and their likely return in terms of revenue. Costs can include office space, equipment, training, travel, insurance, employment agencies, management overhead, and payroll tax. Employees obviously need to generate more revenue than they cost to employ, but so long as this calculation runs in your favor, you can keep adding employees, which will keep adding to revenue.
Advertising & Marketing
So how do you get new business in through the door? Do you employ sales staff? Rely on word of mouth? Advertise in trade papers? Speak at conferences? Buy PPC? Undertake SEO?
Any new SEO business should allocate sufficient resources to advertising and promotion. Without awareness, there are no customers. And without customers, there is no business. On the flip side, spending a lot of money on marketing and advertising that doesn't lead to increased revenue results in no business either.
Methods of Establishing An Advertising Budget
"Half the money I spend on advertising is wasted; the trouble is I don't know which half." - John Wanamaker, US department store merchant
No method is ever perfect. If we knew our spend would always result in profit, business would be very easy. Here's the most common method of determining the appropriate level of advertising spend.
Calculation Based On Percentage of Sales
Advertising is a cost, just like staff and equipment. It's also an investment in your future. How do we know how much to spend on advertising?
Typically, businesses allocate advertising on a percentage of sales basis. They take their total sales figure for a given period, and ear-mark a percentage of those figures for advertising in the next period. Advertising spend should move in tandem with sales.
Take 10 percent and 12 percent of your projected annual, gross sales and multiply each by the markup made on your average transaction.Deduct your annual cost of occupancy (rent) from the adjusted 10 percent of sales number and the adjusted 12 percent number. The remaining balances represent your minimum and maximum allowable ad budgets for the year.
So what percentage do you use?
This will vary, but as a guide, look at what other SEO companies are spending on advertising. Join trade organizations to get hold of these figures.
Be careful not to duplicate these percentages exactly, because your business situation is unique. There might be times when you spend a lot more on advertising than others, especially if you are aggressively targeting new markets, or looking to out-compete your rivals. There will also be times when you spend a lot less. For example, you might have more work than you can handle, and advertising would just exacerbate the problem! SEO consultancy can be a difficult business to scale up easily due to skill shortages.
The important take-away point is that advertising should move in tandem with sales, most of the time. If advertising spend is not related to sales, then it is easy to spend far too much, and have little to show for it. Spend and measure, spend and measure. Repeat.
What if you have no sales figures?
If you're a new SEO business, you won't have any past sales data to go on. This is why it's important to be aware of what other SEO companies are spending. If you've been going a while, you'll have some past data to work with, but keep in mind that past earnings might not be indicative of future earnings. There will be a fair bit of estimation and forecasting either way.
Always Set Objectives
Set clear, specific objectives when allocating capital.
An objective such as "boost profits" is too broad. Go for something specific, such as "sign up 30% more customers than the month before".
Next, figure out which channel will reach your target market. Conferences? Trade publications? PPC? SEO? Web? TV? Radio? A mix?
Whatever channel you choose, be sure to measure performance against your stated objective.
Unless you're trying to build a significant brand to spin off to someone else, such as YouTube, that objective should be grounded in increased revenue. Few, if any, SEO companies can operate at a loss for long, so base your key objectives, and your spending, around increasing revenue, and ultimately - profits.
41% went into business because they were passionate about their idea
39% wanted the freedom that came with being their own boss
Only 7% cited money as being the reason
It's interesting to note that the biggest obstacle people faced with starting their own business was a lack of money. 44% cited lack of money as being the biggest obstacle.
Whatever your reason for starting, it's clear that money is important. The one thing that is guaranteed to kill any business dead, no matter how good the idea or how many customers a business signs up, are bad numbers.
In short, a business plan doesn't need to be complicated, it's just a plan of where you're aiming, and how you intend to get there.
Here are a few further important points to consider.
Obviously, the most important thing to do in business is earn more than you spend. Fail to do so, and the business fails. That means flash offices, expensive chairs, flying business class, etc all must wait until profits allow such expenditure.
So it's a good idea to model oneself on Scrooge McDuck, at least in the early days!
The one thing you'll have the most control over is costs. Keep these as low as possible. Pay yourself the bare minimum you need to live. If you're hiring staff, offer them low salaries and revenue share. You may have noticed there is a start-up culture where fun, hip-ness and enthusiastic participation is emphasized. This is almost always because the owners are trying to keep their costs down. The benefit to the employees is seldom coming from wages, so the job has to be made attractive in other ways.
Keep a look out for hidden costs. What is the true cost of attending that conference? What does it really cost to hire and keep employees? What is the cost of scaling up? Does your office equipment need regular servicing? What are the costs of maintaining a lot of customers? Hidden costs are, of course, hard to spot, and hard to generalize. Be aware that any new variable you introduce to your business will incur costs of some description.
Economic rent, or making a profit over and above the cost of the inputs, is the key target you should aim to be above in your forecasts. If you make $100,000 a year from your business, and take it all in salary, that means that your business makes nothing. Your salary is a cost.
Do your projections allow you to make a profit over and above the salary you pay yourself, after all other expenses are deducted? If so, you've got a business that is likely to thrive, and you you may one day be able to sell.
It's surprising how many business owners don't include their salary as cost.
Break Even Analysis
Here's the meaty bit.
How can you determine, very quickly, if your idea will fail?
You need a break-even analysis. A break-even analysis shows you the amount of revenue you'll need to bring in to cover your expenses, before you make a profit.
Knocking up a break-even analysis is a great way to trial an idea before you put it into practice. After mapping out a simple, back-of-the-envelope business plan, it's the first thing you should do. If you can make these numbers work, then the rest of your detailed business plan can flow from there. If you can't get past a break-even analysis, then the rest of your plan will likely fail.
Here are the components of a break-even analysis:
What are your fixed costs? i.e rent, insurance,power and other set expenses and overheads.
What is your sales revenue?
What is the gross profit on each sale? i.e. the money left over after the selling costs are taken out
What is your average gross profit percentage? Divide your average gross profit figure by the average selling price.
You should now be able to easily calculate your break even point. Divide your annual fixed costs by your gross profit percentage to determine the amount of sales revenue you'll need to bring in to break even.
Is your break-even point higher than expected revenues? You'll need to change your cost structure (make cuts), or increase the profit potential of your sales.
Can you do without employees? Work from home? Sell your product for a higher price? Target a more lucrative market?
If you can make the numbers work at this point, move on and create a fully fleshed-out business plan. If you can't make the numbers work after a few tries, then dump the idea and try another. Pat yourself on the back for being smart enough to run a few numbers, before wasting a lot of time and effort executing a bad idea.
Often, in our rush to get ahead and do things, we forget to plan.
Do you have a business plan? Do you have a business plan, but haven't updated it in a while?
A business plan need not be complicated. A few bullet points scribbled on the back of an envelope can constitute a business plan. A business plan is simply a description of what you intend to do, and how you intend to do it. The advantage of having a plan written down is that your business becomes a lot easier to visualize.
There are a lot of resources available on writing business plans, but few address the specifics of SEO-driven businesses.
In this article, we'll cover business plan basics, then delve into the specifics of SEO related plans.
The Importance Of Writing Things Down
We all make lists. Why? Probably because our memories aren't that good. A list also helps to focus attention. There's something about the very act of writing things down that makes a nebulous action concrete.
The same theory applies to business plans.
For Whom Are You Writing The Business Plan?
Is you aim to attract VC? Get a loan from the bank? For internal staff to be clear about direction? For your own use? Depending on your answer, your business plan will have different requirements in terms of the information provided.
Business plans typically consist of the following components:
Products & Services Description
Strategy & Implementation Plan
Business plans aren't just for start-ups, either.
As a business transitions through different stages as it grows, the plan needs to change. You might want to figure out the best way to invest or fund expansion. A new financial period may be beginning. What are your plans for the next financial year? Do you need to refinance? Are you taking on more employees? Does your old plan fit your new reality?
The Three Levels Of Business Planning
A plan could be as short as one page. Answer the following questions.
What is your concept?
How much money will you need to execute your plan?
How do you intend to plan to market your business to customers/clients?
What will your cash flow look like, and over what time frame?
Simple questions, right. Many business ideas can be adopted or dismissed on those four questions alone, saving you a lot of time, money, and opportunity cost. However, such short plans aren't suitable for seeking investment.
The essential difference between a working plan and a presentation plan is style and appearance. The tone is serious, and it usually comes complete with charts, forecasts and diagrams designed to convey to people that you've put a lot of consideration into your venture.
Presentation plans should be free of industry jargon. Investors like a lot of due diligence, especially when it comes to outlining competitive threats and market opportunities.
A working plan is a plan used to operate your business. Like a short plan, it is less formal in terms of style. It is used internally to ensure everyone has enough information to be on the same page.
SEO Business Models
Ready to dive into SEO as a full-time occupation?
Before you make that leap, let's take a look at a few business models you can choose from, and weigh the pros and cons of each.
This model includes seo agency and independent consultant.
Learn Business Strategies from Clients
There are some great advantages in this model, especially if you're well versed in SEO, but new to business. One advantage is that you get to see how other businesses operate, and get a close look at someone else's marketing strategy. If you're new to SEO, then it can be a good idea to get an agency job first. This way, you can learn the process of SEO, and how to win and negotiate with clients. View this as a training course if your eventual goal is working for yourself.
In terms of working for yourself, there are huge rewards, and huge challenges.
Focus on Business
One challenge is to describe how you're going to get new clients, how you're going to service those clients, and determine if you have enough time to service these clients and still make a profit. Often, SEOs focus on the technical aspect of the job, which is important, but the business aspects are what will make or break you, not your skills.
The client service model is essentially about billing hours. The more hours you bill, the more money you make. Given that there are only 24 hours in the day, of which around half you could reasonably expect to consistently work (and still have time for sleep!), it is important to plan how much time a diverse range of tasks will take to achieve. These tasks include sales, accounting, billing, administration, purchasing, computer maintenance, and, if you get some time left over, SEO!
In order to scale up the number of billable hours, SEO service providers usually add more people. If your aim is to run as a sole operator, that's fine, just make sure you've got enough hours in the day to do what you need to do and make a profit, and consider outsourcing as much of the drudge work as possible.
SEO Publisher Model
This includes affiliate, Adsense and other content based models.
If you can get a site ranked well, then why aren't you doing it for yourself, rather than someone else?
Cost of Entry
The "cost of entry" to launch a website is almost zero. This is both a pro and a con. It's a pro, because you can easily bootstrap (meaning you can self fund) your venture and once you have rankings, you then sell the traffic to the highest bidder, by way of advertising, or revenue share, or both. There is little downside risk, other than it won't work. You've may have lost some time, but compare this with the loses associated with a failed brick n mortar operation!
The major downside, of course, is that anyone can compete with you.
The SEO publisher model used to be a lot easier than it is today. There was a time that SEO was a mystery to most webmasters and site owners. The biggest downside now is the level of competition. As we face more and more competition, this puts downward pressure on revenues, and only the determined will make good money.
However, there is still a lot of money on the table if you execute well, are determined, and prepared to put the work in. It's a cliche, but those who tend to work the hardest and smartest, benefit the most. A neuroscientist who worked with seven-time Formula One Drivers Champion Michael Schumacher said that he had never met anyone who worked so hard. The guy had natural talent, but it was the sheer hard work that put him above the other talented competition.
Same goes with SEO. When there is a lot of competition, you need to be more determined than your competition in order to succeed. If you've got a good work ethic, and thrive on competition, then an SEO publisher model might be a good fit for you.
Rather than asking "is this good enough to rank #1" you have to be willing to put in the extra effort to build a moat if you want to play where the big boys play. Aaron outlined his competitive strategy here.
The obvious way around saturated markets is to look for new markets. If there are a lot of SEOs doing affiliate for any particular company or niche, then you're exposing yourself to a lot of competition. If it is easy for you to sign up and start as an affiliate, then it is easy for everyone else, too.
Instead, consider looking in keyword areas where there are few, if any, affiliates operating. If there is sufficient traffic in the niche, then approach companies directly and negotiate pay-per-lead or private affiliate deals. It can take a bit of effort up front, but the payoff is that you might have a keyword area all to yourself. Most people attracted to the affiliate area will be too lazy to do this.
The SEO publisher model can be scaled more easily than the SEO consultant model, because scaling is as easy as publishing a new site. Once that site is revenue positive, you can further increase its rankings, start another, and so on. Many of the requirements are easily outsourced and do not require extensive , time consuming client interaction. But again, there are only 24 hours in the day, so once you're up and rolling, try to outsource as much as possible.